How to reduce the costs on port dues?

April 10, 2020 · Publications

How to reduce the costs on port dues?

For many years port dues have been remaining the sensible issue for maritime industry in Ukraine. Their rates have always been non-competitive in comparison with the other Black Sea ports, that reduced the attractiveness of domestic harbors. Nowadays, the issue has become even more critical, that spells lots of troubles for cargo owners.

In fact, the legislation provides a number of stimulating mechanisms along with excessive rates of port dues – the only question is to use them correctly. For example, the Order of Ministry of Infrastructure No. 316 stipulates that foreign-going vessels which enter consequently two or more sea ports, pay only 50% of tonnage dues in each sea port (75% in case of more than two ports) and administrative due – only in the first sea port. However, obtaining these discounts in practice is a way more complicated issue.

Let`s consider a practical example. Two foreign-going vessels entered the “Nikolaev” and “Olvia” sea ports. Both the administrative and tonnage dues have been charged by USPA. However, the real story began when the discount issue had arose.

In the view of USPA there was no legal ground for application of discounts. USPA alleged that the vessels had not entered seaport waters, but had been crossing the navigation channel instead. At the same time, according the Law of Ukraine “On Seaports” the channel is not a part of seaport waters.

The second issue was where cargo operations had been conducting. The vessels had been loading at the Black Sea Ship-building yard terminal and at the inshore mooring point №2 (IMP-2). USPA alleged that these loading points are not a part of seaport waters, thus there were no grounds for discounts application.

Elusive borders

According to the provisions of the Order the grounds for charging of tonnage due is entrance/departure of/from the seaport waters. At the same time, the grounds for application of the discounts are entrance/departure of/from the port. The difference is that the port itself includes territory (land part) and seaport waters (water part).

Therefore, having rendered the invoices, USPA acknowledged that vessels entered the seaport waters, and thus the port itself. Otherwise, there have been no ground to charge the dues.

Further on, we substantiated the location of the terminal in the port (exactly in port but not in seaport waters). According to the Sea Ports Register the Black Sea Ship-building yard terminal is the marine terminal, which is included into the borders of Mykolayiv sea port. In addition, according to the information from the USPA official website of, the terminal is exclusively USPAs area of responsibility. Moreover, cargo operations are carried out there under their initiative.

IMP-2

According to the letter of the Mykolayiv branch of USPA IMP-2 is subject to the same legal regime as the seaport waters (including the situations when the foreign-going vessels enter for loading).

At the same time, Olvia branch alleged that there have been no recommendations from Ministry of Infrastructure to apply the discounts to vessels conducting loading operations at IMP-2.

In fact, two branches of the same enterprise maintained mutually exclusive positions. So where is the truth? According to the Compulsory Regulations on the Mykolayiv sea port, IMP-2 is being vessels anchorage. At the same time, according to the article 1 of the Law “On sea ports” hydrotechnical utilities of the sea port (IMP-2 is actually among them) are located within the borders of the sea port and are designed to ensure the safety of navigation, manoeuvring and berthing.

Moreover, IMP-2 is included to the Register of hydrotechnical utilities. Moreover, according to the Register, it is located within the sea port waters of the Mykolayiv sea port. Its owner is USPA. All of the aforementioned arguments were accepted by the court.

Fictional vessel calls

USPA was not going to give up immediately. Having realized the futility of the position on the borders and seaport waters, it decided to protect the interests in another way.

Firstly, the foreign-going status of vessels and the successiveness of vessel calls should have been proved. In this regard we have provided general declaration and pilot`s bills. However, USPA had not stopped at that.

USPA further tried to use definitions from the Customs Code, in particular “port of loading” notion to substantiate its position. Having wrongfully interpreted the term, USPA alleged that in case the vessel entered the first port without any cargo on the board, such call shouldn`t be taken into consideration for calculation of the discount. At the same the Order clearly provided only the criteria on successiveness of the vessels calls for the discounts to be applied. The Order contains no reservations with regard to the “port of loading”.

Eventually, after the evidences on performance of cargo operations have been provided, the court granted our claim in full.

It worth also noting, that we have also successfully appealed the unlawful charging of a channel and ice-breaking dues, that have allowed our client to save significant resources. However, That is a whole other story.

Our recommendations

To get the discount on the port dues is not easy but quite possible task.

Our first recommendation: you should carefully study the provisions of the Order, the Law "On sea ports" and the relevant registers. The arguments followed by references to the legislation leave USPA no other choice but to accept your justified demands. If USPA charges you with tonnage and administrative dues, it follows that it has already recognized the vessel call at the port.

Our second recommendation: you should document every action, which could prove the grounds for discount application: bill of lading, customs declarations, general declarations and etc.